Thursday, October 16, 2008

'Great Depression' Lessons from 'It's a Wonderful Life'

by Len Hart, The Existentialist Cowboy

Watching CNN leaves one the impression that the U.S. is poised, like George Baily on a bridge, about to jump off into another Great Depression. George Baily owned the local 'Building and Loan' from which he received deposits which he loaned to build homes in Bedford Falls, a symbolic American 'every town'.

The film --'It's a Wonderful LIfe' --is set in a time shortly after World War II. James Stewart is George Bailey, a man whose imminent suicide on Christmas Eve required the intervention --not of Congress --but a 'guardian angel'. In the real world, when big banks required a 'guardian angel', they got a bailout! They were not George Baily nor are big banks an integral part of real communities like Baily's 'Buildling and Loan' had been in Bedford Falls.

On Christmas Eve, while on his way to deposit $8,000.00 for the Building & Loan, Uncle Billy (Thomas Mitchell) encounters Mr. Potter and, bursting with pride, shows him the newspaper article about his nephew, about to be honored by the President. Absentmindedly, he leaves the deposit envelope with the $8000 in the folds of the newspaper; Potter discovers it later in his office, but since Billy left the bank without officially depositing it into the B&L account, Potter keeps the money without crediting the account. This is also the day the bank examiner is to inspect the Building & Loan's records; he arrives to find the money missing and George and Billy frantically ransacking the place looking for it. Returning home, George sees his whole life as a massive failure. In desperation, George appeals to Mr. Potter for a loan to rescue the company; Potter turns him down when all the collateral George can offer is $500 equity in a $15,000 life insurance policy. Potter cruelly remarks George is "worth more dead than alive." Later, George crashes his car into a tree during a snowstorm and runs to a nearby bridge, intending to commit suicide.

In the 1930s, disillusioned Americans might have embraced full blown socialism. The 'right wing' was spooked. The FBI considered 'It's a Wonderful Life' to be a subversive film, because it "deliberately maligned the upper class" and attempted to show that "people who had money were mean and despicable characters". They might do so again if it might avoid another Great Depression --still misunderstood by most writers, historians and economists. Right winger cheerleaders for 'laissez-faire' economics must be chagrined by a recent 'Marxist' bailout of so-called 'free enterprise'. Just as economists are conducting post-mortems on our ongoing crash, economists were reading the 'bones' left behind by the stock market crash of 1929.

However, in 1963, Milton Friedman and Anna J. Schwartz transformed the debate about the Great Depression. That year saw the publication of their now-classic book, A Monetary History of the United States, 1867-1960. The Monetary History, the name by which the book is instantly recognized by any macro economist, examined in great detail the relationship between changes in the national money stock--whether determined by conscious policy or by more impersonal forces such as changes in the banking system--and changes in national income and prices.

What Bernanke fails to mention is that Friedman --despite his great reputation and adulation as a 'conservative' economist --leaned heavily upon the work of John Maynard Keynes in his analysis of the Great Depression.

[John Maynard] Keynes seemed to be the right man for the time as he was reflecting the increasingly common view that blamed the capitalists themselves for the situation. In the General Theory Keynes rejected the view that the boom-bust cycle was due to over-expansive government monetary policy and that the stubbornness of the Depression was due to government interference with market mechanisms. He labeled all economists who believed such views as “classical”—in other words, hopelessly out of touch with reality. Instead, Keynes proposed a “general theory” that he thought capable of explaining not only the good times but also the bad.

According to Keynes, what drives the economy is aggregate demand or aggregate expenditures. Aggregate demand can be broken down into three main components: personal consumption (C), private investment (I), and government expenditures (G). The relationship can be summed up with this formula: AD = C + I + G. If Aggregate Demand is strong, the economy will be strong. However, if Aggregate Demand falters, businesses will end up with large unsold inventories and will cut back on production to avoid surpluses in the future. As they cut back they will of course need fewer inputs—including labor—and high unemployment will result.

The culprit in this story, the element that throws the entire system out of whack, is private investment. Private investment consists of business expenditures on machines, buildings, factories, and so on. In other words, investment is capital formation. Keynes claimed that private investment is inherently unstable due to what he called the “animal spirits” of businessmen/capitalists. He believed that businessmen are ultimately irrational and prone to herd-like behavior. Like sheep that blindly follow other sheep in the herd, it is easy for businessmen to become “irrationally exuberant”—as well as irrationally lethargic. Investment lethargy would trigger a large decrease in private investment, thus decreasing aggregate expenditures and triggering an economic downturn.

George Baily represents the 'private investment' part of the Keynes' equation. Had he jumped off the bridge, the picture of Bedford Falls as "Pottersville" might have come true. I see Pottersville whenever I see Wal-Mart come to town to put the locals out of business. It required an intervening angel to save Bedford Falls from its fate at the hands of a greedy banker. Like John Maynard Keynes, we wonder: who will save "capitalism from itself”? Where is our guardian angel?

It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much over expansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again.

I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity... [p. 349].

While some part of the investment which was going on in the world at large was doubtless ill judged and unfruitful, there can, I think, be no doubt that the world was enormously enriched by the constructions of the quinquennium from 1925 to 1929; its wealth increased in these five years by as much as in any other ten or twenty years of its history... [p. 347].

Doubtless, as was inevitable in a period of such rapid changes, the rate of growth of some individual commodities [over 1924-1929] could not always be in just the appropriate relation to that of others. But, on the whole, I see little sign of any serious want of balance such as is alleged by some authorities. The rates of growth [of different sectors]seem to me, looking back, to have been in as good a balance as one could have expected them to be. A few more quinquennia of equal activity might, indeed, have brought us near to the economic Eldorado where all our reasonable economic needs would be satisfied... [pp. 347-48].>

I should not be surprised to learn that the FBI considered 'It's a Wonderful Life' to be subversive in their view. The FBI reported that it "...attempted to discredit bankers by casting Lionel Barrymore as a 'scrooge-type' so that he would be the most hated man in the picture. This, according to these sources, is a common trick used by Communists." So?

There is submitted herewith the running memorandum concerning Communist infiltration of the motion picture industry which has been brought up to date as of May 26, 1947....

In addition, [redacted] stated that, in his opinion, this picture deliberately maligned the upper class, attempting to show the people who had money were mean and despicable characters. [redacted] related that if he made this picture portraying the banker, he would have shown this individual to have been following the rules as laid down by the State Bank Examiner in connection with making loans. Further, [redacted] stated that the scene wouldn't have "suffered at all" in portraying the banker as a man who was protecting funds put in his care by private individuals and adhering to the rules governing the loan of that money rather than portraying the part as it was shown. In summary, [redacted] stated that it was not necessary to make the banker such a mean character and "I would never have done it that way."

[redacted] recalled that approximately 15 years ago, the picture entitled "The Letter" was made in Russia and was later shown in this country. He recalled that in this Russian picture, an individual who had lost his self-respect as well as that of his friends and neighbors because of drunkenness, was given one last chance to redeem himself by going to the bank to get some money to pay off a debt. The old man was a sympathetic character and was so pleased at his opportunity that he was extremely nervous, inferring he might lose the letter of credit or the money itself. In summary, the old man made the journey of several days duration to the bank and with no mishap until he fell asleep on the homeward journey because of his determination to succeed. On this occasion the package of money dropped out of his pocket. Upon arriving home, the old man was so chagrined he hung himself. The next day someone returned the package of money to his wife saying it had been found. [redacted] draws a parallel of this scene and that of the picture previously discussed, showing that Thomas Mitchell who played the part of the man losing the money in the Capra picture suffered the same consequences as the man in the Russian picture in that Mitchell was too old a man to go out and make money to pay off his debt to the banker..

The FBI may have been correct to believe 'It's a Wonderful Life' to be 'subversive'. Indeed! Capra's great film was subversive of the right wing reduction of human beings to mere 'economic units' in a right wing machine in which an increasingly tiny elite alone --Mr Potters --benefit. The difference is that in an FBI version of 'It's a Wonderful Life', George Bailey would have jumped off the bridge.

I believe that it is the FBI that is subversive of our most precious freedoms guaranteed us in the Bill of Rights! It is the FBI that is subversive of the intentions of James Madison who wrote our Bill of Rights, subversive of the intentions of those brave patriots who were willing to hang in order order to secure those rights. What has the FBI to say about that? That the FBI would think a classic film 'subversive' I find subversive! I would suggest the FBI STFU with respect to those "freedoms" that are guaranteed us by law!! I wonder if the FBI would like to debate that topic with me.

From an online reader review of "It's a Wonderful Life".

I've always thought that the reason It's A Wonderful Life has enjoyed such enduring popularity is that more than any other film it shows what us clearly and poignantly what can be the value of a single individual and the contribution to the greater good that almost everyone can make.

George Bailey as portrayed by James Stewart is the kind of "every man" hero with whom all us can identify. He had every day problems to be sure, raising and providing for a family, but he had even bigger problems. Fate has made him the rallying point of opposition in his small town of Bedford Falls to the "richest and meanest man in town", embodied in Lionel Barrymore.

It's a real David vs. Goliath battle. Barrymore seems to have unlimited resources at his disposal. Samuel S. Hinds as Peter Bailey put it so well to him in asking what are you doing all this for? Barrymore does have more money than he could ever possibly use. A little charity wouldn't hurt him.

Remember the basic plot outline. A whole lot of people in Bedford Falls one post World War II Christmas Eve see that their friend George is toting a heavy load of mysterious origins. Their prayers reach the heavens where an angel is dispatched to aid.

But before Henry Travers the angel arrives, he's given the story of George Bailey's life. And we see the kind of struggles he's had, the sacrifices he's made for the good of a whole lot of others. We've also seen a greedy and grasping Potter, grabbing everything that George Bailey cannot save.

Something happens that day before Christmas through no fault of his own, Bailey is in big trouble. It's driven him to the brink of despair. That's why the angel is sent down. He shows him the alternate universe that would have been had he never existed. It's something each and every one of us should try to do, step outside ourselves see just what our contributions can be.

But I think what Frank Capra is trying to say in this greatest of his films is that having done that and we realize we haven't contributed to the greater good of humankind, we resolve to do so. It's a simple, but profound lesson.

What if Potter got the same opportunity? In a sense Charles Dickens did just that in A Christmas Carol. Would Lionel Barrymore change? It's an interesting point of speculation.

In addition to those cast members already mentioned a whole group of players who worked with Capra before grace this film. Add to that some others and you have a perfectly cast feature picture.

Donna Reed has an interesting part as well. Your choice of mate is real important in life. Had she not been as loving and supportive to George Bailey, he might very well have taken a different route in life. Mary Hatch Bailey became a signature part for her, more identified than her role in From Here to Eternity which got her an Oscar. It certainly was the basis for her TV series.

When Todd Karns who plays Harry Bailey toasts his brother he's saying that the riches of the world are not necessarily things that can be quantified. Your life is not measured in material things, but in how you use the material things given you.

And that universal lesson will be taught into eternity as long as It's A Wonderful Life is shown every year. Wouldst we all learn it.